# Annuity Value and the Lottery

Please include in your response the formulas needed for this problem, as well as a detailed explanation as to how to solve them.

The $40 million lottery payment that you just won actually pays $2 million per year for 20 years. If the discount rate is 8 percent, and the first payment comes in 1 year:

a) What is the present value of the winnings?

b) What is the first payment comes immediately?

https://brainmass.com/economics/finance/annuity-value-lottery-18719

#### Solution Preview

The present value P of periodic payment K per year at the rate of i for n years is given by:

P = K [ (1+i)^n - 1 ] / [ i*(1+i)^n ] ...

#### Solution Summary

Annuity Value and the Lottery are computed.

$2.19